It’s almost like an entirely different language: “easement,” “take-back,” “front ratio.” Real estate terms can leave you bewildered. Here is a glossary of some of the more frequently used terms:
Acceptance: A positive response to an offer or counteroffer. An acceptance may be “conditional,” “express,” “implied” or “qualified.”
Appraisal: An estimate of value, as determined by an independent agent familiar with local real estate values.
Assumption: When a buyer assumes the loan payments and obligations of the seller. If the purchaser defaults, however, both the buyer and seller are responsible for the debt.
Broker: A licensed real estate professional who, typically, represents the seller of a property. A broker’s duties might include determining market values, advertising properties for sale, showing properties to prospective buyers, and advising clients with regard to offers and related matters.
Closing costs: Costs associated with the purchase of a home that must be paid at the sale closing. These could include mortgage fees, title insurance, appraisal and inspection fees and points.
Comparative market analysis: A listing of recent home sales in the neighborhood, used as a basis for price comparison. This is prepared by a real estate agent. Also known as a “comp.”
Contingency: A contractual provision that renders an agreement incomplete until a designated event (such as an inspection or an escrow payment) occurs.
Co-signer: A person who assumes joint liability for a loan. The co-signer of a loan agreement is not necessarily, however, a co-owner.
Credit report: Used by lenders to determine a potential borrower’s creditworthiness. Independent sources compile the report, which lists the borrower’s debts, liabilities and assets.
Easement: A landowner can grant a second party the right to use land in a certain way. For example, if you need to cross your neighbor’s property to access your garage, you would ask your neighbor to grant you an easement. Easements may restrict changes a buyer can make to a property.
Multiple Listing Service. The Multiple Listing Service, or MLS, is a local database that lists homes for sale. Member real estate agents can access the MLS and show listed homes to potential buyers.
Option. The right to buy or sell property or sign a contract, based upon certain terms and conditions. Usually applicable to specific time frames during which the “option” may be exercised.
Plat. A map that shows all boundaries of a piece of property.
Pre-approval. A process whereby a potential home buyer secures a guaranteed mortgage approval before making an offer on a house. A lending institution guarantees in writing to grant a loan for a specified amount. Not to be confused with pre-qualification.
Pre-qualification. Some lenders “pre-qualify” mortgage applicants in less than an hour by performing cursory checks. Seldom can a lender fully check an applicant’s credit, asset and debt status this quickly, so final approval typically takes at least a few more days. Though such preliminary pre-qualifications may soon lead to a full pre-approval, there is no guarantee until the applicant receives a letter, certificate or wallet-size card bearing the mortgage-holder’s name and maximum loan amount.
Settlement (Closing). The process by which all financial dealings and contractual arrangements are completed for the buyer and seller. At the time of settlement, or closing, all debts are paid, adjustments made and money disbursed, and a deed is prepared in the new owner’s name.
Survey. A professional examination of a property. A survey usually will reveal the size of a property, its boundary distances, ground contours and where improvements or alterations have been made.
Take-back. A loan made directly from the seller to the buyer.
Title. Evidence of the right of property ownership; can be held solely, jointly, in common or in corporate or partnership form.
Title defect. Anything that is wrong with a title — including an easement, encroachment or lien — that has not been recorded with the city building department or the county recorder’s office.
Title insurance. Insurance that protects a property owner against defects to or claims against a property. Typically purchased by the buyer upon closing, sometimes as required by the lender. Title companies issue the policies.
Warranty. A protection plan, generally paid for by the seller, that protects the buyer against major repair expenses and breakdowns. Warranties are assigned to specific items, usually major appliances or systems on the property.
